How to Secure Payments from Overseas Customers

Expanding your client base beyond your home market can be a great way to stand out against competitors, grow your enterprise and ensure your business continues to fare well even when your domestic economy may not be. However, as you expand your operations overseas, you have to adhere to certain international rules, regulations and practices which can be frustrating. One of the biggest challenges is certainty of payment and the time it takes to be paid (given long international shipment and payment terms). If you are a small business and your cash flow is tight already, this can be a real hurdle to export. If your business is dealing with clients based within the UK, chances are that you will be able to chase after the money and pursue the matter as per local legislation. However, when your clients are based in Spain or Italy, for example, you may find the process of debt collection alien, tedious or even impractical. Usually, Italian and Spanish clients are liable to pay their dues or invoices after a period of 67 to 75 days – much longer than standard 30-day payment terms in the UK.

The Law Governing International Trade

When it comes to suppliers of goods and services, businesses within UK and Wales are protected by the Late Payment of Commercial Debt Act 1998. In 2014, the law was re-assessed to also cover international payments, following the case of Martrade Shipping v United Enterprises, as long as the initial contract was initiated under English law. Section 12 of this Late Payment Act implied that the international party would not be held liable to the law if they had no prominent connection or transaction with a business entity within the UK.

However, businesses with dealings across the EU and even outside can claim their dues under other laws as well. You can always charge late payment interest or penalty which the overseas customers are liable to pay from the next day after the agreed upon date. According to some laws, businesses can claim a £40 fixed amount along with interest for low-value invoices. This is also applicable to businesses dealing in European Countries where up €40 can be claimed as late fees.

What You Can Do to Secure Payments from Overseas Customers

Here are some of the options you can research to make sure you set up a secure system of trading internationally before you ship your precious products abroad:

Get legal advice

Not only can a lawyer educate you about payments policies and trade legislation in other countries, they can also draw up a contract between you and your trading partners, stating clearly the intended terms of business and when payments are due. This is one of the safest ways to secure your business.

Explore government help

Our local government is likely to provide not only a multitude of online, but also a number of public schemes and bodies set up to help small business trade across borders. Schemes like the London Mayor’s international business programme are helping start-ups in particular do business with overseas enterprises safely.

Make use of trade associations and chambers of commerce

Similarly, trade associations and chambers of commerce literally exist to help businesses navigate the complex world of trading internationally. Trade bodies like the Federation of Garden & Leisure Manufacturers Ltd. lobby on behalf of industry sectors, promoting the industries they represent worldwide and matchmake domestic producers and manufacturers with trustworthy international clients. This is exactly what COBCOE Connects set out to do: it is a new online network providing high quality, trusted and relevant business contacts in international markets. Consulting such organisations before you agree to trade with an overseas business could help you ensure you get paid on time.

Research the finance technology and tools available to help you trade

Traditionally, products such as letters of credit and credit insurance were the main form of externally guaranteeing that late or non-payment of your invoices would not dent your business. But with the FinTech revolution, a number of smart finance platforms, such as URICA, have become available that can help you and your trading partners both get the payment terms you require, without it costing the earth or taking months to set up.

Such platforms turn business funding on its head, addressing the inherent conflict between domestic suppliers requiring payment before shipping their goods abroad and overseas clients who require extended payment terms. If you’re nervous about starting to export or expanding your dealings with overseas customers, the above steps can help mitigate many of the risks involved so you can focus on growing your business.

Camilla Bellhouse

As a Network Development Manager at URICA, Camilla has worked with a number of businesses across the UK and gained an insight into business funding issues. She is an expert in Construction, Aerospace, Media & Advertising and Engineering.